Microecon Final Outline

Microeconomics Final Study Guide

Old stuff:

* Surplus

* Taxes

* Elasticity

* S & D curve

* What market is total surplus maximized in?

Ch. 13

The Costs of Production

* Input Labor (# of workers)

* Quantity of Output = Q

* Marginal product of labor = the increase in output that arises from an additional unit input = ΔQ/ ΔL

* Fixed cost = costs that do not vary with the quantity of output produced

* Variable cost = costs that do not vary with the quantity of output produced

* Total cost = the market value of the inputs a form uses in production

* Marginal cost = the increase in total cost that arises form an extra unit of production = ΔTC/ΔQ

* Average fixed cost = fixed costs divided by the quantity of output = FC/Q

* Average Variable cost = variable costs divided by the quantity of output = VC/Q

* Average Total cost = total cost divided by the quantity of output = TC/Q

* Explicit costs = annual labor + raw materials + interest on loan

* Implicit costs = foregone interest + foregone salary

* Variable costs = material + labor

* Fixed costs = interest bank loan + implicit costs

* Economic Profit = total costs includes implicit and explicit costs

* Accounting Profit = TC includes implicit and explicit costs

* Total revenus is the total cost + profit

* If the marginal prodcut is dimnishing it means that the firm is producing with a crowding effect. Marginal product means what each extra work adds to it

* Increasing marginal product decreasing marginal cost

* Decreasing marginal productincreasing marginal cost

* If marginal cost < average total cost, ATC starts decreasing; when they’re equal, the MC > ATC, so ATC is pulled up

* Given a problem: MC = ΔTC/ΔQ; do not accept the offer when the marginal benefit (price they’re WTP) < MC

Ch 14

Perfect competition characteristics: every firm is a price taker

* Many buyers & sellers

* Goods...